Fed holds key interest rate steady, signals future hike

WASHINGTON — Federal Reserve policymakers on Wednesday held their key interest rate steady but remained on track for another small hike in September that could draw President Donald Trump’s ire.

Trump delivered rare public criticism of the independent Fed last month for its recent interest rate increases, complaining they could hurt the strengthening U.S. economy. He didn’t have any worries Wednesday after the Fed voted unanimously to keep the rate at a target between 1.75 percent and 2 percent.

In a statement after its two-day meeting, Fed policymakers were more upbeat about economic conditions than they were after their last gathering in June. They described the economy as growing at a “strong rate,” an upgrade from the “solid rate” cited in the June statement. Fed officials also added that household spending had joined business investment in growing “strongly” recently.

The Fed raised the rate target by 0.25 percentage points in June, the second such hike this year and the fifth since March 2017. Also in June, Fed policymakers forecast two more hikes this year. Investors are expecting the next hike after the Fed’s next meeting, in late September.

All signs point to continued small hikes of the Fed’s still historically low short-term interest rate.

Fed policymakers reiterated Wednesday that “further gradual increases” in the rate would be consistent with sustaining the economic expansion while keeping the labor market strong and inflation near the central bank’s 2 percent annual target.

The U.S. economy expanded at a 4.1 percent annual rate in the April-through-June period as tax cuts fueled strong consumer spending.

The labor market also has continued humming along. Economists are forecasting that another solid jobs report is coming from the Labor Department on Friday, with payroll gains of about 190,000 in July and the unemployment ticking down to 3.9 percent.

Trump frequently touts the state of the economy and labor market, often exaggerating how good the conditions are. But rising interest rates could slow growth. On July 19, he told CNBC he was “not thrilled” by the Fed’s rate hikes and repeated his criticism on Twitter the next day.

It was the first time a sitting U.S. president publicly pressured the Fed on interest rates since 1992.

Despite the comments, Trump said in the CNBC interview he was “letting them do what they feel is best.” Fed Chairman Jerome Powell, who was nominated by Trump and took over in February, has said that he would act independently.